Inventory, relocation and warehousing issues are top furniture industry issues – Sourcing Journal

Two years of unprecedented demand, supply chain disruptions, labor shortages and a global pandemic have created an unprecedented furniture market. And that market continues to evolve, as consumer spending on household goods declines and inventory management becomes a challenge.

At the recent American Home Furnishings Alliance (AHFA) Logistics Conference, furniture industry experts and analysts provided insight into the company’s current state and direction in the months to come.

With consumer demand slowing, it’s no surprise that furniture orders fell this spring. According to a survey by Smith Leonard Accountants & Consultants, March orders are down 26% from March 2021 and year-to-date orders are down about 21%.

“Orders are soft and units are down significantly,” said Ken Smith, partner at Smith Leonard. “Backlogs are still very high, but lead times are better.”

The decline was reflected in May retail sales figures reported by the National Retail Federation, which found furniture and home furnishings stores were down 0.9% month-on-month. other seasonally adjusted, but up 2.3% unadjusted year-over-year.

Smith said the survey found shipments were up 19% from March 2021 and 4% since the start of the year, which helped reduce backlogs somewhat. But this moving commodity has left many retailers scrambling to find warehouse space to store the sudden glut of inventory coming their way.

“Retail warehouses are packed and some are asking to slow deliveries,” Smith said. “La-Z-Boy had to rent 40% more warehouse space to accommodate their inventory.”

To make room, many retailers have been forced to reduce merchandise. But Smith cautions that discounting should be done strategically to avoid devaluing the product in the long run.

“It’s imperative that if we do discounts, we have to let the consumer know it’s because of excess stock,” he said.

With the continuing and evolving problems with imports, some furniture manufacturers have turned to relocation or near offshoring as an alternative to production in Asia. Mexico has been a popular choice for many companies, with furniture makers like Ethan Allen, Marge Carson, Palliser, and others investing in facilities south of the border.

And according to Rosemary Coates, executive director of the Reshoring Institute, a return to domestic production has become more favorable to many consumers, especially as astronomical freight rates have made imports more expensive.

“America’s mood has changed,” she said. “Most Americans prefer to buy American-made products, and people have this perception that American-made products are of higher quality and they will pay more.”

Coates said the Reshoring Institute conducted a consumer survey in 2020 that found 87% of Americans would prefer to buy products made in the United States. And 60% of those consumers said they would be willing to pay more, with the majority saying they would. pay up to 20% more.

“If we can get around 15% cost of production, we can justify doing it here,” Coates said.

But Coates said the key to making a domestic production model work is bringing a skilled workforce back to the United States, focused on higher-quality products.

“We don’t want to bring all the jobs back to the United States, we want to bring back the good jobs,” she said. “Instead of asking them to put stakes in holes, we want them to direct the robots by putting stakes in holes.”

As furniture manufacturers and retailers navigate the ever-changing supply chain landscape and retail climate, Smith said many challenges and opportunities lie ahead.

“The second half of the year is going to be a roller coaster,” he said. “We’ve had two unprecedented years in the furniture industry, and who knew business could be so good and so tough at the same time.”